Being poorer than peers takes a toll on health and happiness

People who are unable to sustain the same standard of living as their peers experience relative deprivation, a condition that can reduce happiness and negatively impact health.

Relative deprivation is prevalent in countries with high socio-economic inequality and rigid social structures, such as India and Ghana. People who sense their social status to be lower than that of their peers often address this perceived shortage by increased spending on status-seeking goods. This leads to people being less able to afford basic necessities which increases their poverty, and lessens their physical and mental well-being.

IZA World of Labor author Xi Chen writes in his paper on relative deprivation and well-being that “people become discontented when they live in conditions of inequality and relative deprivation.”

“Poverty is not just an absolute concept,” says Chen. “It is also relative, dependent on the cost of maintaining social life in a specific society.”

Chen, an Assistant Professor at Yale School of Public Health, says that policymakers need to address both relative deprivation and absolute poverty in order to significantly decrease poverty levels. His suggested policies to achieve this include measures to curb spending among the poor and a consumption tax on status-seeking goods.

Read more here.

Related articles:
Relative deprivation and individual well-being, by Xi Chen
Poverty persistence and poverty dynamics, by Martin Biewen
Happiness and the emigration decision, by Artjoms Ivlevs